Coming soon, 11-month rent agreement in Tamil Nadu

Image used for representational purpose.

CHENNAI: Your rental agreement is set to undergo a sea change after Tamil Nadu implements the Centre’s Model Tenancy Act. Changes include the mandatory registration of all rental agreements over 11 months in period or `50,000 in value, advance amount to be limited to three months and tenant’s right to continue possession of the property after lease period to be limited to six months.

The rental agreements now cite the more than five-decade-old Tamil Nadu Building (Lease and Rent) Control Act, 1960, which will change once the new Act is brought in. As land — and thus rent — is a State subject, the central Act is a draft; it is up to individual States to adopt it. However, by making it a mandatory condition for obtaining funds for ‘Housing for All’ Mission under the Pradhan Mantri Awas Yojana, the Centre has managed to convince States, including Tamil Nadu to come on board.
The new Act has some key changes when compared to the existing State Act. Under the Model Tenancy Act, it is mandatory that all rental agreements that have a period exceeding 11 months or are valued at over `50,000 must be registered with the Registration Department under the provisions of Indian Registration Act.

The new Act is considered to be more beneficial for the landlords. Under the old Rent Control Act, there was no tenure for tenancy and evicting a tenant was highly restrictive. Previously, the stress was on the tenant’s right to occupation. However, in the new legislation, this right to possession is limited to only six months after the lease period.
This would prevent the misuse, including usurpation of property, of the earlier Act, said sources. Officials point out there are several cases where tenants refuse to vacate the premises, which then become aged, ill-maintained, and on the verge of crashing.

In another feature, if the landlord takes possession of the premises to undertake repair or reconstruction, the re-entry of the tenant is on the basis of a mutually-agreed new tenancy agreement. Earlier, the premises had to be offered to the same tenant.
Also, the new Act has the provision to renew rent at periodic intervals.
In one of the features advantageous for tenants, the new Act restricts the advance amount that landlords can collect up to three months’ rent. However, it is another matter that this is decided arbitrarily by the landlord, with some charging as much as 12 months’ rent as advance. Though the old Act limits advance to just one month, it is at least three months’ rent at all metros and other cities in India.

The earlier Act which was passed to regulate rents also gave powers to the government to take properties on fair rent, even against the wish of the property owner, if it was in the interest of the State. But senior officials feel the provisions are outdated for the present scenario, where a robust real estate sector is now supplying sufficient housing stock.
A big challenge for the regulator was to calculate ‘fair rent’ to be charged by the landlord. The fixing of rent depends on the land value, and there was a chance that it could be exploited by the landlord by charging exorbitant rent. The new Act will regulate rent as per the contract and safeguard tenants from extreme escalation due to rise in land value.

Sources indicated that all provisions of the Model Tenancy Act have to be covered by the lease agreement to be entered between the landlord and the tenant.
Meanwhile, the rent courts functioning under the provisions of Tamil Nadu Buildings (Lease and Rent control) Act, 1960, may be continued in the Model Tenancy Act, too, by re-designating them to function under the new act in order to save the loss of revenue to the government.